In brief

Following Beeple’s $69.3 million NFT sales in March, the digital art market appears to have gone into an overdrive mode. In the first half of 2021, the market for non-fungible tokens (NFTs) surged to $2.5 billion. Comparatively, the sales volume of the global NFT market was $338 million in 2020.

From investors spending millions of dollars on CryptoPunks to digital artists churning out new NFTs at a record pace, one could assume that the frenzy is only just beginning. However, some industry experts have argued that the NFT flame will eventually burn out. For instance, Litecoin’s Charlie Lee predicts that the value of most non-fungible tokens will eventually crash to zero as supply overwhelms demand. He wrote:

“The problem with NFTs is that they are non-finite tokens. There is zero cost to create an unlimited number of tokens.”

For some context, a non-fungible token is a crypto asset used to represent a tangible or intangible item such as an image, in-game item, real-life artwork, or even real estate. The properties and ownership of the NFT are recorded on a blockchain, allowing it to be traded as a stand-in for the item it represents.

The current NFT landscape is primarily a proliferation of a few successful collections like CryptoPunks and several others. To a large extent, these copy and paste projects do not bring anything new, instead, they rely on randomly generated avatars. Lee is right to an extent based on this argument.

On the flip side, it would be wrong to dismiss the entire NFT market on the premise of the proliferation of digital art and several CryptoPunk wannabes. That being said, the next million-dollar NFT project may not necessarily be a 24×24 pixel art image of misfits and eccentrics or a collage of 5,000 pieces. It might be something entirely out of the box.

Speaking of out of the box, a new NFT project is looking past digital art. The project, known as BitColors, features a collection of 1,000 handcrafted NFT colors. Thus they are creating a rabbit hole where users are allowed to own and trade colors.

BitColors is introducing a new angle to the NFT frenzy as there are currently no other projects like this. Considering its early-mover advantage, early adopters may be able to replicate the success of projects like CryptoPunks in the form of an exponential ROI.

Every color in the collection is handcrafted, with no artificially predetermined traits with no soul in them. BitColors users have the freedom to decide the value of each color based on their own feelings. In general, this appears to be an art project that might catch the attention of auction houses like Christie’s, Hermitage, and Sotheby’s.

Another interesting aspect of BitColors is the fact that it has kept the size of its collection at a relatively small number. With just 1,000 NFTs, the project is priming the future value of its tokens by introducing an element of scarcity.

NFTs are definitely here to stay. The underlying tech behind the sector packs such immense potential. Even though the rave of the moment is to try to buy an NFT at a cheap price and flip it for massive profit, the future of the sector and possible use cases will likely extend beyond what we are already familiar with. In the long run, only projects that bring something unique to the table will stand the test of time.

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